October 4, 2022

Enterprise JM

Do the Business

SkyWater Technology Reports Fourth Quarter and Full Year 2021 Results

BLOOMINGTON, Minn.–(BUSINESS WIRE)–SkyWater Technology (NASDAQ: SKYT), the trusted technology realization partner, today announced financial results for the fourth quarter and full year 2021, ended January 2, 2022.

  • Record annual revenue increased 16% year-over-year to $162.8 million. Quarterly revenue decreased 3% year-over-year to $38.5 million.
  • Annual net loss to shareholders of $50.7 million, or (31)% of revenue. Quarterly net loss to shareholders of $27.0 million, or (70)% of revenue, includes a $13.4 million one-time inventory write-down.
  • Annual adjusted EBITDA of $(2.6) million, or (1.6)% of revenue. Quarterly adjusted EBITDA of $(4.9) million, or (12.6)% of revenue.

“SkyWater made great progress this year toward our vision of accelerating the path from ideation to commercialization in the semiconductor industry,” said SkyWater President and CEO Thomas Sonderman. “SkyWater continued to make important advancements on our long-term strategic platforms. Our radiation hardened technology recently achieved a critical qualification milestone and we made significant progress in power management with the introduction of our highly differentiated high-speed switching power MOSFET technology. We remain convinced that SkyWater’s unique model for timely and efficient technology realization is ideally positioned to drive increased shareholder value as our nation commits to enhancing domestic semiconductor manufacturing.”

Sonderman concluded, “Fourth quarter revenue grew 15% year-over-year, excluding the extra operating week in Q4 2020 and tool revenue. Labor market inflation and supply chain challenges persisted throughout the quarter, and we expect to continue to navigate these constraints, while investing strategically for growth. In 2022, we expect revenue growth near our long-term growth target of 25% and gross margin expansion. This is supported by our 2021 pipeline growth, new and expected program wins, and the expected movement of our radiation hardened technology to the productization phase.”

Recent Business Updates:

  • Won nine new Advanced Technology Services programs in the fourth quarter of 2021.
  • Achieved a critical radiation hardened (rad-hard) technology qualification milestone.
  • Established presence in Indiana at [email protected] Technology Park, adjacent to the Naval Surface Warfare Center, Crane Division (NSWC Crane) as part of the company’s rad-hard technology roadmap.
  • Introduced a breakthrough silicon power MOSFET device with Applied Novel Devices, Inc. (AND) enabling improved energy efficiency for power conversion applications.
  • Continued to make strong progress at the company’s heterogeneous integration fab in Florida including the fabrication of the company’s first full flow interposer within the first year after taking over operations.
  • Increased activities, a common measure of productivity, in the Minnesota facility by 12% year-over-year led by strong Advanced Technology Services execution.
  • Continued to amplify the company’s unique capabilities within all levels of government to support our nation’s commitment to invest strategically in domestic semiconductor manufacturing.
  • Announced technology development to rapidly enable the production ramp of nanoscale sensors with NanoDx to enhance and expand accurate, rapid testing for several indications, including COVID-19, traumatic brain injury, sepsis and stroke.
  • Lauded the U.S. House of Representatives in the passage of the America COMPETES Act, which includes funding of $52 billion for the CHIPS for America Act.
  • Continued to navigate a dynamic supply chain for substrates, chemicals, and gases as well as inflationary pressures pervasive in the markets.
  • Achieved AS9100 certification, the standardized quality management system for organizations that design, develop, or provide aviation, space and defense products and services, at Minnesota facility.
  • Expanded Board of Directors with appointments of independent directors Nancy Fares, Amy Leong and Greg Graves.

 

Q4 2021 Summary:

 
 

GAAP

 

 

 

 

 

 

 

 

 

In USD millions, except per share data

Q4 21

 

Q4 20

 

Y/Y

 

Q3 21

 

Q/Q

Advanced Technology Services revenue

$24.4

 

$26.3

 

(7)%

 

$22.4

 

9%

Wafer Services revenue

$14.2

 

$13.4

 

5%

 

$12.7

 

12%

Revenue

$38.5

 

$39.8

 

(3)%

 

$35.0

 

10%

Gross profit (loss)

$(16.6)

 

$3.5

 

(571)%

 

$(1.8)

 

810%

Gross margin

(43.1)%

 

8.9%

 

(5,200) bps

 

(5.2)%

 

(3,790) bps

Net loss to shareholders

$(27.0)

 

$(12.3)

 

(120)%

 

$(13.9)

 

(95)%

Basic loss per share

$(0.69)

 

$(0.68)

 

(1)%

 

$(0.36)

 

(92)%

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

In USD millions, except per share data

Q4 21

 

Q4 20

 

Y/Y

 

Q3 21

 

Q/Q

Non-GAAP gross profit (loss)

$(1.9)

 

$4.8

 

(139)%

 

$(0.5)

 

284%

Non-GAAP gross margin

(4.8)%

 

12.2%

 

(1,700) bps

 

(1.4)%

 

(340) bps

Non-GAAP net loss to shareholders

$(11.2)

 

$(11.4)

 

2%

 

$(11.5)

 

3%

Non-GAAP basic loss per share

$(0.28)

 

$(0.63)

 

56%

 

$(0.29)

 

3%

Adjusted EBITDA

$(4.9)

 

$1.3

 

(478)%

 

$(2.7)

 

(80)%

Adjusted EBITDA margin

(12.6%)

 

3.2%

 

(1,580) bps

 

(7.7%)

 

(490) bps

2021 Summary:

 

GAAP

 

 

 

 

 

In USD millions, except per share data

FY21

 

FY20

 

Y/Y

Advanced Technology Services revenue

$111.7

 

$94.0

 

19%

Wafer Services revenue

$51.2

 

$46.4

 

10%

Revenue

$162.8

 

$140.4

 

16%

Gross profit (loss)

$(7.5)

 

$22.7

 

(133)%

Gross margin

(4.6)%

 

16.2%

 

(2,080) bps

Net loss to shareholders

$(50.7)

 

$(20.6)

 

(146)%

Basic loss per share

$(1.76)

 

$(1.15)

 

(54)%

Non-GAAP

 

 

 

 

 

In USD millions, except per share data

FY21

 

FY20

 

Y/Y

Non-GAAP gross profit (loss)

$9.9

 

$24.3

 

(59)%

Non-GAAP gross margin

6.1%

 

17.3%

 

(1,120) bps

Non-GAAP net loss to shareholders

$(30.0)

 

$(15.8)

 

(90)%

Non-GAAP basic loss per share

$(1.05)

 

$(0.88)

 

(19)%

Adjusted EBITDA

$(2.6)

 

$14.4

 

(118)%

Adjusted EBITDA margin

(1.6%)

 

10.3%

 

(1,190) bps

Q4 2021 Results:

  • Revenue: Revenue of $38.5 million decreased 3% year-over-year. Advanced Technology Services revenue of $24.4 million decreased 7% year-over-year due to less non-recurring tool revenue. Advanced Technology Services revenue contains $1.1 million of tool revenue in fourth quarter 2021 and $4.9 million in fourth quarter 2020. Wafer Services revenue of $14.2 million increased 5% compared to the fourth quarter of 2020 driven by increased revenue from a large customer contract.
  • Gross Profit (Loss): GAAP gross loss was $16.6 million, or (43.1)% of revenue, compared to gross profit of $3.5 million, or 8.9% of revenue, in the fourth quarter of 2020. GAAP gross loss for the fourth quarter of 2021 includes a $13.4 million inventory write-down charge for temperature differential sensing wafers. Cost of revenues in fourth quarter of 2021 contained $2.7 million for heterogeneous integration and $1.7 million in depreciation for the radiation hardened facility. Non-GAAP gross loss was $1.9 million, or (4.8)% of revenue, compared to gross profit of $4.8 million, or 12.2% of revenue, in the fourth quarter of 2020.
  • Net Loss: GAAP net loss to shareholders of $27.0 million, or $(0.69) per share, compared to a net loss to shareholders of $12.3 million, or $(0.68) per share, in the fourth quarter of 2020. Non-GAAP net loss to shareholders of $11.2 million, or $(0.28) per share, compared to a net loss to shareholders of $11.4 million, or $(0.63) per share, in the fourth quarter of 2020.
  • Adjusted EBITDA: Adjusted EBITDA was $(4.9) million, or (12.6)% of revenue, compared to $1.3 million or 3.2% of revenue in the fourth quarter of 2020.
  • Balance Sheet: Cash and cash equivalents of $12.9 million compared to $7.4 million from January 3, 2021.

A reconciliation between historical GAAP and non-GAAP information is contained in the tables below in the section titled, “Non-GAAP Financial Measures.”

Investor Webcast

SkyWater will host a conference call on Wednesday, February 23, 2022, at 9:00 a.m. CT to discuss its fourth quarter and full year 2021 financial results. A live webcast of the call will be available online at IR.SkyWaterTechnology.com.

About SkyWater Technology

SkyWater (NASDAQ: SKYT) is a U.S. investor-owned semiconductor manufacturer and a DOD-accredited Trusted supplier. SkyWater’s Technology as a ServiceSM model streamlines the path to production for customers with development services, volume production and heterogeneous integration solutions in its world-class U.S. facilities. This pioneering model enables innovators to co-create the next wave of technology with diverse categories including mixed-signal CMOS, read-out ICs, rad-hard, power discretes, MEMS, superconducting ICs, photonics, carbon nanotubes and interposers. SkyWater serves growing markets including aerospace & defense, automotive, biomedical, cloud & computing, consumer, industrial and IoT. For more information, visit: www.skywatertechnology.com.

Cautionary Statement Regarding Preliminary Results

The Company’s results for the fiscal quarter and year ended January 2, 2022 are preliminary, unaudited and subject to the finalization of the Company’s fourth quarter review and full-year audit and should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. The Company cautions you that actual results may differ materially from those described in this press release.

SkyWater Technology Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements that are based on the Company’s current expectations or forecasts of future events, rather than past, events and outcomes, and such statements are not guarantees of future performance. Forward-looking statements include all statements other than statements of historical fact contained in this presentation, including information or predictions concerning the Company’s future business, results of operations, financial performance, plans and objectives, competitive position, market trends, and potential growth and market opportunities. In some cases, you can identify forward-looking statements by words such as “intends,” “estimates,” “predicts,” “potential,” “continues,” “anticipates,” “plans,” “expects,” “believes,” “should,” “could,” “may,” “will,” “targets,” “projects,” “seeks” or the negative of these terms or other comparable terminology.

Forward-looking statements are subject to risks, uncertainties and assumptions, which may cause the Company’s actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Key factors that could cause the Company’s actual results to be different than expected or anticipated include, but are not limited to: our goals and strategies; our future business development, financial condition and results of operations; our ability to continue operating our sole semiconductor foundry at full capacity; our ability to appropriately respond to changing technologies on a timely and cost-effective basis; our customer relationships and our ability to retain and expand our customer relationships; our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses; our expectations regarding dependence on our largest customers; our ability to diversify our customer base and develop relationships in new markets; the performance and reliability of our third-party suppliers and manufacturers; our ability to procure tools, materials, and chemicals amid industry-wide supply chain shortages; our ability to control costs, including our operating and capital expenses; the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets; the level of demand in our customers’ end markets; our ability to attract, train and retain key qualified personnel in a competitive labor market; adverse litigation judgments, settlements or other litigation-related costs; changes in trade policies, including the imposition of tariffs; our ability to raise additional capital or financing; our ability to accurately forecast demand; the impact of the COVID-19 pandemic on our business, results of operations and financial condition and our customers, suppliers and workforce; the impact of the COVID-19 pandemic on the global economy; the level and timing of U.S. government program funding; our ability to maintain compliance with certain U.S. government contracting requirements; regulatory developments in the United States and foreign countries; our ability to protect our intellectual property rights; and other factors discussed in the “Risk Factors” section of the prospectus the Company filed with the SEC on April 22, 2021 and in other documents that the Company files with the SEC, which are available at http://www.sec.gov. The Company assumes no obligation to update any forward-looking statements, which speak only as of the date of this press release.

SKYT-IR

SKYWATER TECHNOLOGY, INC.

Consolidated Balance Sheets

(Unaudited)

 

January 2, 2022

 

January 3, 2021

 

(in thousands, except share and

unit data)

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

12,917

 

 

$

7,436

 

Accounts receivable, net

 

39,381

 

 

 

29,995

 

Inventories

 

17,500

 

 

 

27,169

 

Prepaid expenses and other current assets

 

3,854

 

 

 

11,972

 

Income tax receivable

 

745

 

 

 

 

Total current assets

 

74,397

 

 

 

76,572

 

Property and equipment, net

 

180,475

 

 

 

178,078

 

Intangible assets, net

 

3,891

 

 

 

4,561

 

Other assets

 

4,835

 

 

 

3,998

 

Total assets

$

263,598

 

 

$

263,209

 

Liabilities and Shareholders’ Equity (Deficit)

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

1,021

 

 

$

2,772

 

Accounts payable

 

7,637

 

 

 

16,792

 

Accrued expenses

 

17,483

 

 

 

25,496

 

Income taxes payable

 

 

 

 

1,710

 

Current portion of contingent consideration

 

816

 

 

 

8,904

 

Deferred revenue – current

 

20,808

 

 

 

30,653

 

Total current liabilities

 

47,765

 

 

 

86,327

 

Long-term liabilities:

 

 

 

Long-term debt, less current portion and unamortized debt issuance costs

 

58,428

 

 

 

69,828

 

Contingent consideration, less current portion

 

 

 

 

1,996

 

Long-term incentive plan

 

4,039

 

 

 

3,185

 

Deferred revenue – long-term

 

88,094

 

 

 

95,399

 

Deferred income tax liability, net

 

995

 

 

 

8,058

 

Other long-term liabilities

 

4,350

 

 

 

 

Total long-term liabilities

 

155,906

 

 

 

178,466

 

Total liabilities

 

203,671

 

 

 

264,793

 

Commitments and contingencies

 

 

 

Shareholders’ equity (deficit):

 

 

 

Preferred stock, $0.01 par value per share (80,000,000 and zero shares authorized; zero issued and outstanding)

 

 

 

 

 

Common stock, $0.01 par value per share (200,000,000 and zero shares authorized, 39,836,038 and zero shares issued and outstanding)

 

398

 

 

 

 

Additional paid-in capital

 

115,208

 

 

 

 

Class A preferred units (zero and 2,000,000 units authorized; zero issued and outstanding)

 

 

 

 

 

Class B preferred units (zero and 18,000,000 units authorized; zero and 18,000,000 units issued and outstanding)

 

 

 

 

 

Common units (zero and 5,000,000 units authorized; zero and 3,057,344 units issued; zero and 2,107,452 outstanding)

 

 

 

 

3,767

 

Accumulated deficit

 

(54,479

)

 

 

(3,783

)

Total shareholders’ equity (deficit), SkyWater Technology, Inc.

 

61,127

 

 

 

(16

)

Non-controlling interests

 

(1,200

)

 

 

(1,568

)

Total shareholders’ equity (deficit)

 

59,927

 

 

 

(1,584

)

Total liabilities and shareholders’ equity

$

263,598

 

 

$

263,209

 

The accompanying notes are an integral part of these consolidated financial statements.

SKYWATER TECHNOLOGY, INC.

Consolidated Statements of Operations

(Unaudited)

 

Three Months Ended

 

Twelve Months Ended

 

January 2,

2022

 

January 3,

2021

 

January 2,

2022

 

January 3,

2021

 

(in thousands, except share, unit and per share and unit data)

Revenue

$

38,533

 

 

$

39,772

 

 

$

162,848

 

 

$

140,438

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of revenue, before inventory write-down

 

41,714

 

 

 

36,244

 

 

 

156,878

 

 

 

117,746

 

Inventory write-down (1)

 

13,442

 

 

 

 

 

 

13,442

 

 

 

 

Total cost of revenue

 

55,156

 

 

 

36,244

 

 

 

170,320

 

 

 

117,746

 

Gross profit (loss)

 

(16,623

)

 

 

3,528

 

 

 

(7,472

)

 

 

22,692

 

Research and development

 

1,228

 

 

 

1,672

 

 

 

8,747

 

 

 

4,208

 

Selling, general and administrative expenses

 

9,951

 

 

 

6,713

 

 

 

43,595

 

 

 

25,032

 

Change in fair value of contingent consideration

 

(154

)

 

 

741

 

 

 

(2,710

)

 

 

2,094

 

Operating loss

 

(27,648

)

 

 

(5,598

)

 

 

(57,104

)

 

 

(8,642

)

Other income (expense):

 

 

 

 

 

 

 

Paycheck Protection Program loan forgiveness

 

 

 

 

 

 

 

6,453

 

 

 

 

Change in fair value of warrant liability

 

 

 

 

1,680

 

 

 

 

 

 

780

 

Loss on debt extinguishment

 

 

 

 

(1,434

)

 

 

 

 

 

(1,434

)

Interest expense

 

(839

)

 

 

(1,412

)

 

 

(3,542

)

 

 

(5,499

)

Total other expense

 

(839

)

 

 

(1,166

)

 

 

2,911

 

 

 

(6,153

)

Loss before income taxes

 

(28,487

)

 

 

(6,764

)

 

 

(54,193

)

 

 

(14,795

)

Income tax expense (benefit)

 

(2,322

)

 

 

4,631

 

 

 

(6,790

)

 

 

4,919

 

Net loss

 

(26,165

)

 

 

(11,395

)

 

 

(47,403

)

 

 

(19,714

)

Less: net income attributable to non-controlling interests

 

871

 

 

 

903

 

 

 

3,293

 

 

 

903

 

Net loss attributable to SkyWater Technology, Inc.

$

(27,036

)

 

$

(12,298

)

 

$

(50,696

)

 

$

(20,617

)

Net loss per share attributable to common shareholders, basic and diluted:

$

(0.69

)

 

 

 

$

(1.76

)

 

 

Net loss per unit attributable to Class B preferred unitholders, basic and diluted:

 

 

$

(0.68

)

 

 

 

$

(1.15

)

Weighted average shares used in computing net loss per common share, basic and diluted:

 

39,324,851

 

 

 

 

 

29,038,174

 

 

 

Weighted average units used in computing net loss per Class B preferred unit, basic and diluted:

 

 

 

18,000,000

 

 

 

 

 

18,000,000

 

The accompanying notes are an integral part of these consolidated financial statements.

SKYWATER TECHNOLOGY, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Twelve Months Ended

 

January 2, 2022

 

January 3, 2021

 

(in thousands)

Cash flows from operating activities:

 

 

 

Net loss

$

(47,403

)

 

$

(19,714

)

Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:

 

 

 

Depreciation and amortization

 

27,368

 

 

 

18,866

 

Inventory write-down (1)

 

13,442

 

 

 

 

Gain on Paycheck Protection Program loan forgiveness

 

(6,453

)

 

 

 

Foundry services obligation

 

 

 

 

(3,732

)

Gain on sale of property and equipment

 

(2,012

)

 

 

(1,124

)

Amortization of debt issuance costs included in interest expense

 

621

 

 

 

1,661

 

Long-term incentive and stock-based compensation

 

12,533

 

 

 

2,640

 

Change in fair value of warrant liability

 

 

 

 

(780

)

Change in fair value of contingent consideration

 

(2,710

)

 

 

2,094

 

Cash paid for contingent consideration in excess of initial valuation

 

(7,374

)

 

 

(7,296

)

Deferred income taxes

 

(7,063

)

 

 

2,387

 

Non-cash revenue related to customer equipment

 

(2,481

)

 

 

 

Loss on debt extinguishment

 

 

 

 

1,434

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(9,387

)

 

 

31,452

 

Inventories

 

(3,773

)

 

 

(11,175

)

Prepaid expenses and other assets

 

5,098

 

 

 

(9,411

)

Accounts payable

 

(1,198

)

 

 

483

 

Accrued expenses

 

(569

)

 

 

11,601

 

Deferred revenue

 

(17,150

)

 

 

74,578

 

Income tax payable and receivable

 

(2,455

)

 

 

2,231

 

Net cash (used in) provided by operating activities

 

(50,966

)

 

 

96,195

 

Cash flows from investing activities:

 

 

 

Purchase of software and licenses

 

(1,220

)

 

 

(4,085

)

Proceeds from sale of property and equipment

 

2,159

 

 

 

1,676

 

Purchases of property and equipment

 

(35,476

)

 

 

(85,768

)

Net cash used in investing activities

 

(34,537

)

 

 

(88,177

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of common stock pursuant to the initial public offering, net of underwriting discounts and commissions

 

104,212

 

 

 

 

Cash paid for offering costs

 

(1,867

)

 

 

(2,183

)

Proceeds from Paycheck Protection Program loan

 

 

 

 

6,453

 

Repayment of term loan

 

 

 

 

(38,270

)

Cash paid for term loan extinguishment

 

 

 

 

(405

)

Net repayment on line of credit

 

 

 

 

(12,380

)

Net repayment on Revolver

 

(6,081

)

 

 

32,303

 

Proceeds from Financing

 

 

 

 

39,000

 

Repayment of Financing

 

(990

)

 

 

 

Cash paid for capital leases

 

(1,115

)

 

 

 

Cash paid for debt issuance costs

 

(250

)

 

 

(5,182

)

Repurchase of warrants

 

 

 

 

(14,000

)

Repurchase of common units

 

 

 

 

(4,085

)

Cash paid for contingent consideration

 

 

 

 

(3,998

)

Proceeds from exercise of common unit options

 

 

 

 

31

 

Distributions to VIE member

 

(2,925

)

 

 

(2,471

)

Net cash provided by (used in) financing activities

 

90,984

 

 

 

(5,187

)

Net change in cash and cash equivalents

 

5,481

 

 

 

2,831

 

Cash and cash equivalents – beginning of period

 

7,436

 

 

 

4,605

 

Cash and cash equivalents – end of period

$

12,917

 

 

$

7,436

 

The accompanying notes are an integral part of these consolidated financial statements.

Supplemental Revenue Information by Quarter

 

Q1 2020

 

Q2 2020

 

Q3 2020

 

Q4 2020

 

2020

 

Q1 2021

 

Q2 2021

 

Q3 2021

 

Q4 2021

 

2021

 

(in thousands)

Wafer Services revenue

$

13,318

 

$

10,896

 

$

8,762

 

$

13,442

 

$

46,418

 

$

10,019

 

$

14,312

 

$

12,652

 

$

14,174

 

$

51,157

Advanced Technology Services revenue

 

23,586

 

 

19,863

 

 

24,241

 

 

26,330

 

 

94,020

 

 

38,082

 

 

26,877

 

 

22,373

 

 

24,359

 

 

111,691

Revenue

$

36,904

 

$

30,759

 

$

33,003

 

$

39,772

 

$

140,438

 

$

48,101

 

$

41,189

 

$

35,025

 

$

38,533

 

$

162,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tool revenue (included in ATS revenue)

$

3,173

 

$

 

$

360

 

$

4,895

 

$

8,428

 

$

15,405

 

$

2,346

 

$

281

 

$

1,127

 

$

19,159

Non-GAAP Financial Measures

We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We provide non-GAAP gross profit, non-GAAP gross margin, non-GAAP net loss to shareholders, and non-GAAP net loss per share. We provide these non-GAAP financial measures because we believe this non-GAAP presentation provides a baseline for analyzing trends in our business and to exclude certain items that may not be indicative of our core operating results. The non-GAAP financial measures disclosed in this earnings press release should not be viewed as an alternative to, or more meaningful than, the reported results prepared in accordance with GAAP. In addition, because our non-GAAP measures are not determined in accordance with U.S. GAAP, these measures are susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. As a result, the non-GAAP financial measures presented in this earnings press release may not be directly comparable to similarly titled measures presented by other companies.

We also provide adjusted EBITDA and adjusted EBITDA margin as supplemental non-GAAP measurements. We define adjusted EBITDA as net income (loss) before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including fair value changes in contingent considerations, fair value changes in warrants and management fees, inventory write-down, corporate conversion and IPO related costs, Paycheck Protection Program loan forgiveness, SkyWater Florida start-up costs, net income attributable to non-controlling interests, and management transition expense. We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income or loss in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.

The following tables present a reconciliation of the most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, to our non-GAAP financial measures.

SKYWATER TECHNOLOGY, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

January 2,

2022

 

January 3,

2021

 

October 3,

2021

 

January 2,

2022

 

January 3,

2021

 

(in thousands)

GAAP revenue

$

38,533

 

 

$

39,772

 

 

$

35,025

 

 

$

162,848

 

 

$

140,438

 

Estimated impact of additional operating week

 

 

 

 

(2,491

)

 

 

 

 

 

 

 

 

(2,491

)

Tool revenue

 

(1,127

)

 

 

(4,895

)

 

 

(281

)

 

 

(19,160

)

 

 

(8,428

)

Non-GAAP revenue

$

37,406

 

 

$

32,386

 

 

$

34,744

 

 

$

143,688

 

 

$

129,519

 

 

 

 

 

 

 

 

 

 

 

GAAP cost of revenue

$

55,156

 

 

$

36,244

 

 

$

36,852

 

 

$

170,320

 

 

$

117,746

 

Inventory write-down (1)

 

(13,442

)

 

 

 

 

 

 

 

 

(13,442

)

 

 

 

Equity-based compensation (2)

 

(1,130

)

 

 

(1,308

)

 

 

(967

)

 

 

(3,042

)

 

 

(1,644

)

SkyWater Florida start-up costs (3)

 

(187

)

 

 

 

 

 

(374

)

 

 

(879

)

 

 

 

Non-GAAP cost of revenue

$

40,397

 

 

$

34,936

 

 

$

35,511

 

 

$

152,957

 

 

$

116,102

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit (loss)

$

(16,623

)

 

$

3,528

 

 

$

(1,827

)

 

$

(7,472

)

 

$

22,692

 

GAAP gross margin

 

(43.1

) %

 

 

8.9

%

 

 

(5.2

) %

 

 

(4.6

) %

 

 

16.2

%

Inventory write-down (1)

 

13,442

 

 

 

 

 

 

 

 

 

13,442

 

 

 

 

Equity-based compensation (2)

 

1,130

 

 

 

1,308

 

 

 

967

 

 

 

3,042

 

 

 

1,644

 

SkyWater Florida start-up costs (3)

 

187

 

 

 

 

 

 

374

 

 

 

879

 

 

 

 

Non-GAAP gross profit (loss)

$

(1,864

)

 

$

4,836

 

 

$

(486

)

 

$

9,891

 

 

$

24,336

 

Non-GAAP gross margin

 

(4.8

) %

 

 

12.2

%

 

 

(1.4

) %

 

 

6.1

%

 

 

17.3

%

 

 

 

 

 

 

 

 

 

 

GAAP research and development

$

1,228

 

 

$

1,672

 

 

$

2,253

 

 

$

8,747

 

 

$

4,208

 

Equity-based compensation (2)

 

655

 

 

 

(39

)

 

 

(341

)

 

 

(1,182

)

 

 

(56

)

Non-GAAP research and development

$

1,883

 

 

$

1,633

 

 

$

1,912

 

 

$

7,565

 

 

$

4,152

 

 

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

$

9,951

 

 

$

6,713

 

 

$

9,626

 

 

$

43,595

 

 

$

25,032

 

SkyWater Florida start-up costs (3)

 

(22

)

 

 

 

 

 

(60

)

 

 

(268

)

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

(435

)

 

 

 

Equity-based compensation (2)

 

(1,655

)

 

 

(242

)

 

 

(2,086

)

 

 

(8,303

)

 

 

(940

)

Management fees (8)

 

 

 

 

(235

)

 

 

 

 

 

(332

)

 

 

(879

)

Non-GAAP selling, general and administrative expenses

$

8,274

 

 

$

6,236

 

 

$

7,480

 

 

$

34,257

 

 

$

23,213

 

 

Three Months Ended

 

Twelve Months Ended

 

January 2,

2022

 

January 3,

2021

 

October 3,

2021

 

January 2,

2022

 

January 3,

2021

 

(in thousands)

GAAP net loss to shareholders

$

(27,036

)

 

$

(12,298

)

 

$

(13,870

)

 

$

(50,696

)

 

$

(20,617

)

Inventory write-down (1)

 

13,442

 

 

 

 

 

 

 

 

 

13,442

 

 

 

 

Paycheck Protection Program loan forgiveness

 

 

 

 

 

 

 

 

 

 

(6,453

)

 

 

 

Corporate conversion and initial public offering related costs (4)

 

205

 

 

 

 

 

 

208

 

 

 

1,934

 

 

 

 

SkyWater Florida start-up costs (3)

 

209

 

 

 

 

 

 

434

 

 

 

1,147

 

 

 

 

Management transition expense (5)

 

 

 

 

 

 

 

 

 

 

435

 

 

 

 

Fair value changes in contingent consideration (6)

 

(154

)

 

 

741

 

 

 

(1,670

)

 

 

(2,710

)

 

 

2,094

 

Equity-based compensation (2)

 

2,130

 

 

 

1,589

 

 

 

3,394

 

 

 

12,527

 

 

 

2,640

 

Fair value changes in warrants (7)

 

 

 

 

(1,680

)

 

 

 

 

 

 

 

 

(780

)

Management fees (8)

 

 

 

 

235

 

 

 

 

 

 

332

 

 

 

879

 

Non-GAAP net loss to shareholders

$

(11,204

)

 

$

(11,413

)

 

$

(11,504

)

 

$

(30,042

)

 

$

(15,784

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation allocation in the consolidated statements of operations:

 

 

 

 

 

 

 

 

 

Cost of revenue

$

1,130

 

 

$

1,308

 

 

$

967

 

 

$

3,042

 

 

$

1,644

 

Research and development

 

(655

)

 

 

39

 

 

 

341

 

 

 

1,182

 

 

 

56

 

Selling, general and administrative expenses

 

1,655

 

 

 

242

 

 

 

2,086

 

 

 

8,303

 

 

 

940

 

 

$

2,130

 

 

$

1,589

 

 

$

3,394

 

 

$

12,527

 

 

$

2,640

 

 

 

 

 

 

 

 

 

 

 

SkyWater Florida start-up costs allocation in the consolidated statements of operations:

 

 

 

 

 

 

 

 

 

Cost of revenue

$

187

 

 

$

 

 

$

374

 

 

$

879

 

 

$

 

Selling, general and administrative expenses

 

22

 

 

 

 

 

 

60

 

 

 

268

 

 

 

 

 

$

209

 

 

$

 

 

$

434

 

 

$

1,147

 

 

$

 

 

Three Months Ended

January 2, 2022

 

Twelve Months Ended

January 2, 2022

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(27,036

)

 

$

(11,204

)

 

$

(50,696

)

 

$

(30,042

)

Undistributed preferred return to Class B preferred unitholders

 

 

 

 

 

 

 

(398

)

 

 

(398

)

Net loss attributable to common shareholders

$

(27,036

)

 

$

(11,204

)

 

$

(51,094

)

 

$

(30,440

)

Denominator:

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

39,325

 

 

 

39,325

 

 

 

29,038

 

 

 

29,038

 

Net loss per common share, basic and diluted

$

(0.69

)

 

$

(0.28

)

 

$

(1.76

)

 

$

(1.05

)

 

 

 

 

 

 

 

 

 

Three Months Ended

January 3, 2021

 

Twelve Months Ended

January 3, 2021

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

Computation of net loss per Class B preferred unit, basic and diluted:

(in thousands, except per unit data)

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(12,298

)

 

$

(11,413

)

 

$

(20,617

)

 

$

(15,784

)

Denominator:

 

 

 

 

 

 

 

Weighted-average Class B preferred units outstanding, basic and diluted

 

18,000

 

 

 

18,000

 

 

 

18,000

 

 

 

18,000

 

Net loss per Class B preferred unit, basic and diluted

$

(0.68

)

 

$

(0.63

)

 

$

(1.15

)

 

$

(0.88

)

 

 

 

 

 

 

 

 

 

Three Months Ended

October 3, 2021

 

 

 

 

 

GAAP

 

Non-GAAP

 

 

 

 

Computation of net loss per common share, basic and diluted:

(in thousands, except per share data)

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Net loss attributable to SkyWater Technology, Inc.

$

(13,870

)

 

$

(11,504

)

 

 

 

 

Undistributed preferred return to Class B preferred unitholders

 

 

 

 

 

 

 

 

 

Net loss attributable to common shareholders

$

(13,870

)

 

$

(11,504

)

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

39,060

 

 

 

39,060

 

 

 

 

 

Net loss per common share, basic and diluted

$

(0.36

)

 

$

(0.29

)

 

 

 

 

 

Three Months Ended

Twelve Months Ended Quarter

Ended

 

January 2,

2022

 

January 3,

2021

 

January 2,

2022

 

January 3,

2021

 

(in thousands)

Net loss to shareholders

$

(27,036

)

 

$

(12,298

)

 

$

(50,696

)

 

$

(20,617

)

Interest expense

 

839

 

 

 

1,412

 

 

 

3,542

 

 

 

5,499

 

Income tax expense (benefit)

 

(2,322

)

 

 

4,631

 

 

 

(6,790

)

 

 

4,919

 

Depreciation and amortization

 

6,957

 

 

 

5,753

 

 

 

27,368

 

 

 

18,866

 

EBITDA

 

(21,562

)

 

 

(502

)

 

 

(26,576

)

 

 

8,667

 

Inventory write-down (1)

 

13,442

 

 

 

 

 

 

13,442

 

 

 

 

Paycheck Protection Program loan forgiveness

 

 

 

 

 

 

 

(6,453

)

 

 

 

Corporate conversion and initial public offering related costs (4)

 

205

 

 

 

 

 

 

1,934

 

 

 

 

SkyWater Florida start-up costs (2)

 

209

 

 

 

 

 

 

1,147

 

 

 

 

Management transition expense (4)

 

 

 

 

 

 

 

435

 

 

 

 

Fair value changes in contingent consideration (5)

 

(154

)

 

 

741

 

 

 

(2,710

)

 

 

2,094

 

Equity-based compensation (1)

 

2,130

 

 

 

1,589

 

 

 

12,527

 

 

 

2,640

 

Fair value changes in warrants (6)

 

 

 

 

(1,680

)

 

 

 

 

 

(780

)

Management fees (7)

 

 

 

 

235

 

 

 

332

 

 

 

879

 

Net income attributable to non-controlling interests (9)

 

871

 

 

 

903

 

 

 

3,293

 

 

 

903

 

Adjusted EBITDA

$

(4,859

)

 

$

1,286

 

 

$

(2,629

)

 

$

14,403

 

__________________

(1)

Represents the full write-down for inventory to cost of revenue for inventory in which we were contracted to manufacture for a specific customer. The customer’s financing for its COVID-19-related business fell through and the customer was unable to meet its contractual payment obligations.

(2)

Represents non-cash equity-based compensation expense.

(3)

Represents start-up costs associated with our 200 mm heterogeneous integration facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not indicative of our ongoing costs and will be discontinued following the start-up of SkyWater Florida.

(4)

Represents expenses directly associated with the corporate conversion and IPO, such as professional, consulting, legal and accounting services. This also includes bonus awards granted to employees upon the completion of the IPO. These expenses are not indicative of our ongoing costs and were discontinued following the completion of our initial public offering.

(5)

Represents expense for the departure of our former Chief Administrative Officer, which includes primarily severance benefits.

(6)

Represents non-cash valuation adjustment of contingent consideration to fair market value during the period.

(7)

Represents non-cash valuation adjustment of warrants to fair market value during the period.

(8)

Represents a related party transaction with Oxbow Industries, our principal stockholders. As these fees are not part of the core business, did not continue after our IPO and are excluded from management’s assessment of the business, we believe it is useful to investors to view our results excluding these fees.

(9)

Represents net income attributable to our VIE, which was formed for the purpose of purchasing our land, building with the proceeds of a bank loan. Since depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.